Author: Andrew Packer

Income investing

Dividend Growth Investor: 23 Dividend Growth Companies Raising Dividends Last Week

Posted on by Andrew Packer

After a rough year for stocks last year, 2023 started off strong. However, that rally is fading as inflation comes in hot and corporate earnings show a slowdown.

That’s why investors who take a long-term view of the markets will focus on companies that pay growing dividends. After all, a company that can increase its dividend over time is a company with growing cash flows that can be turned over to shareholders.

2023 has been kind to dividend investors. 56 companies have increased dividends in February so far. Of those, 23 have grown their dividends for at least 10 years in a row.

That includes a number of well-known companies, as well as many smaller stocks that remain off the radar.

One highlight is The Coca-Cola Company (KO). The soft drink and beverage company has now raised its dividend payout for an impressive 61 years in a row. The company now yields 3.1 percent, and the payout was increased by 4.5 percent.

Another highlight is utility company NextEra Energy (NEE). They raised their dividend payout by 10 percent. That’s higher than the increase in inflation over the past year. The utility  yields about 2.5 percent.

Most dividend growth stocks don’t have high current yields. But for investors who think in terms of years and decades, dividend growth investing can prove a simple and effective way to profit in the stock market.

 

To read the full list of dividend growth stocks increasing their payouts this year, click here.

Economy

SchiffGold: Here’s why Inflation Is Going to Get Worse

Posted on by Andrew Packer

After dropping for most of the past year, inflation numbers finally started to tick higher slightly in January. Given that nothing moves in a straight line, we could still be on track to see inflation drop.

However, other factors at play suggest that inflation will remain higher for longer. Indeed, it may even get worse in the coming months before it gets better.

In January, prices rose 0.5 percent month-over-month. Those who saw the Federal Reserve as being near the end of its rate hike cycle may need to rethink that view. That’s because inflation is still at 6.4 percent, or more than triple the central bank’s 2 percent target.

So what’s the plan from here? The Fed likely still needs to raise interest rates at least until rates are higher than inflation. Rates are at about 5  percent today, so further hikes are needed. And even then, it will take time to see if those hikes are working.

Meanwhile, the Fed has brought out the concept of supercore inflation. It’s a measure that excludes the cost of shelter.

That move came as mortgage rates more than doubled in the past year, and rents saw a big jump in the last three years. It’s easy to see why the Fed would want to downplay that.

And it’s another sign that inflation may continue higher for longer. That, in turn, could continue to weigh on stocks.

 

To read the full analysis, click here.

Economy

A Wealth of Common Sense: An Ongoing Stimulus In the Economy For Years to Come

Posted on by Andrew Packer

Investors tend to be focused on the prices of assets. It doesn’t matter if it’s stocks, bonds, real estate, cryptocurrencies, and so on. However, many of those assets produce cash flows. And looking at investments from a cash flow perspective can lead to radically different results.

One way that individuals can control their cash flows is to find ways to lower costs. And many took advantage of a big cost-saving measure in the past few years.

Millions of homeowners took advantage of historically-low interest rates to lock in a lower rate. Some homeowners were able to save hundreds of dollars on monthly payments.

Over a 30 year mortgage, or 360 payments, the savings can add up to hundreds of thousands of dollars.

That savings could potentially act as a stimulus for the economy. The extra few hundred per month per household not going into home payments can go into other forms of spending.

About 66 percent of U.S. households have a home with a mortgage. And mortgage debt makes up about 70 percent of all household debt in the U.S.

Total refinancings saved billions in annual cash flow. If that continues to go towards other forms of consumer spending, it’s clear that there’s a lot of capital flowing where there wasn’t before.

That could lead to continued inflationary pressure for years to come.

 

To read the full analysis, click here.

Commodities

Blain’s Morning Porridge: Central Banks, Recession landing Risks, and why China is the Issue to Watch Now

Posted on by Andrew Packer

While inflation has started to tick higher, some investors are calling for a “no landing” scenario for the markets. That’s simply Wall Street speak for saying the economy won’t land into a recession, whether soft or hard.

However, recession risks continue to rise, as seen with inflation’s stubborn rise. And geopolitical factors could also tip the world into a recession. That means that some landing remains likely.

The Federal Reserve remains the biggest weight for investors right now. The central bank has slowed the rate of its interest rate hikes. But it still remains committed to increasing rates further.

That’s a clear sign that the Fed won’t make its proverbial “pivot” anytime soon. And that investors should remain cautious.

But there are other factors at play. Investors have been bullish on the global economy as Chinas has ended its harsh Covid lockdown policy. However, that hasn’t yet translated into any sign of increased economic growth.

China’s massive population, now free to move about, should be showing up in global oil demand statistics. It’s not. If China, one of the largest engines of global economic growth, remains anemic, so will the global economy.

It’s clear that investors should continue to expect conditions to weaken overall. That still can mean some profits going long in some parts of the market. But chances are we’re nowhere near the flip to a bullish market anytime soon.

 

To read the full analysis, click here.

 

Stock market strategies

Elliott Wave Options: More Downside to Come?

Posted on by Andrew Packer

Both consumer price inflation and producer price inflation have shown a bump higher in the last few months. That’s caused overall inflation to trend slightly higher as well.

As a result, investors and traders are considering the potential for inflation to remain high. And it could even increase further in the months ahead. That’s caused the market to start trending lower, following a rally to start off 2023.

Of the two, producer price inflation is the more concerning factor. It’s a sign that wholesalers and producers are paying higher prices. Those higher prices are often passed on to consumers as much as possible.

So it’s no surprise that markets have started to trend down. Traders are starting to price in higher interest rates – and for rates to stay higher for longer.

That selloff was enough for the market to break its 50-day moving average, a sign that a further decline in the coming weeks could occur. Added to the prior market declines in recent days, and it’s possible that markets are oversold in the short-term.

That could mean a small bounce here, with a longer-term downtrend still setting in.

That means investors should be more cautious in the next few weeks. A bigger market drop could lead to more buying opportunities in the weeks ahead before the next move higher.

But rising inflationary measures are a sign that the overall market pain that started last year is nowhere near done yet.

 

To watch the full analysis, click here.

Stock market strategies

ValueWalk: How Much Can You Rally Expect to Earn Investing?

Posted on by Andrew Packer

Why do we invest? At its core, we’re looking to have our saved money earn more money for us. Over the course of a lifetime, investing can lead to excellent results.

However, expectations for future returns can wildly change in the middle of either a bull or bear market. Keeping a grounded approach can ensure that investors don’t get too caught up in market fear… or hype.

Realistically, investors may want to start by looking at some of the best performers of all time. Warren Buffett has managed to return about 20 percent annualized over decades.

That’s significantly better than the returns of the stock market’s average of about 9 percent. But it’s also far smaller than the short-term returns on risky stocks like a hot tech name or a cryptocurrency play that takes off.

Investors can certainly make speculative investments that can be big winners. But by looking at total portfolio returns, investors can get a realistic view of sustained success over the course of decades.

Looking to make Buffett-like returns of 15-20 percent consistently year-in, year-out, will lead to massive returns. That’s thanks to the power of compounding.

Investors who simply follow the S&P 500 can earn about two-thirds of the returns of a great investor with nearly no cost and no work. Most investors fail to meet those returns, usually from trying to chase big short-term gains.

 

To read the full analysis, click here.

Economy

Meet Kevin: The Insane China Problem

Posted on by Andrew Packer

There are two views when it comes to China’s economy. The first is that the country’s rapid growth over the past few decades is sustainable. And that demand from its 1.4 billion citizens will lead to continued profits for the makers of consumer and luxury goods.

The second view is that the country has focused on its economic growth without creating significant value. That can be seen with the country’s investment in real estate, and by creating giant, but empty, cities.

 So far, markets have given more credence to the first view. China ended its harsh lockdown policies late last year. Its citizens are now freer to move about the country, even at the risk of catching Covid.

That’s thought to lead to a spike in demand for a number of goods and resources, particularly energy. A strong jump in demand there could keep energy prices higher, and help fuel inflation in the U.S.

So far, global oil prices have been fairly steady. That suggests that the spike in demand hasn’t occurred. And looking at excess savings in Chinese households, it’s clear that there isn’t much room for a further rise in demand.

That suggests that Chinese growth will be lower than expected. And with it, global growth. The good news? It likely won’t lead to a spike in inflation elsewhere around the world.

 

To watch the full video, click here.

Economy

Of Two Minds: The New Normal: Death Spirals and Speculative Frenzies

Posted on by Andrew Packer

Most market commentary is focused on either a “hard” landing or a “soft” landing for the economy. Either way, it means the Federal Reserve is using higher interest rates to engineer a slowdown.

The problem is that the economy is far too complex of a machine. We saw with the pandemic that it can’t be switched totally off, nor would we want it to. And trying to pause it can lead to unintended consequences that can last for years.

The biggest challenge today is the world’s massive use of credit and debt. The U.S. government routinely borrows more than $1 trillion than it brings in every year. That doesn’t even include state or municipal debt.

That money is mostly financed at short-term rates. When interest rates were set at zero by the Fed, the cost was nominal. With interest rates closing in on 5 percent, their highest level in over 15 years, the cost to finance existing debt is on track to explode higher.

Adding in corporate and consumer debt, and it’s likely that significant spending will have to be curtailed to finance existing debt obligations.

That points not to just a hard landing, but potentially years of slow, or even zero economic growth. It also means that capital that would have gone into innovative new technologies will be lacking, curtailing future growth.

 

To read the full analysis, click here.

Economy

Gains, Pains & Capital: Here’s Your Roadmap For the Market’s Next Money Making Move

Posted on by Andrew Packer

It’s easy to get caught in the trap of looking at the market based on calendar years. However, market trends don’t always follow the calendar. The most recent bear market is an exception, starting in early January 2022.

Since then, we’ve seen stocks drop, then rally back to a key metric such as the 50- or 200-day moving average, or just above. From that peak, a new downtrend has started.

The market’s strong performance since the start of the year suggests that a pullback is ahead. Typically, stocks have been dropping to 8-12 percent under their moving averages before finding a short-term bottom.

That suggests a modest downtrend in the market in the coming weeks, or even months. While that’s not indicative of a market crash, it is a sign that stocks have gotten too far ahead of themselves in recent weeks.

The market’s recent slowdown and shift into neutral is a sign that any short-term upside is likely over for most potential trades. And that traders can fare better with trades betting against the market in the weeks ahead.

Bear in mind that this analysis has been the case for the bear market that started in 2022. And that the moves may change in time. Any change in monetary policy, for instance, or a sign of a significant economic slowdown, could cause the market reaction to change.

 

To read the full analysis, click here.

Stock market strategies

Game of Trades: SP500 Volatility Is Breaking Out Again

Posted on by Andrew Packer

While traders have been focused on the market’s strong rally since the start of the year, the rally has come with declining volatility. The days of daily swings of 2 or even 3 percent in the market have largely abated. Even 1 percent moves have become more of the exception than the rule.

However, the past few trading days have seen a move higher in volatility. And it could lead to a bigger jump in the weeks ahead…

It’s typical for markets to have a volatility spike after calming down. Looking at the volatility index (VIX) since 2018, it’s clear that there’s been a long-term uptrend.

Simply put, volatility has been making higher lows when it does settle down. That means traders expect the markets to have more daily swings.

Over the past 5 years, markets have performed well. But they have had some big pullbacks, such as the 2020 covid crash and the 2022 meltdown.

That’s similar to the markets in the 1990s. During that time, many tech stocks had big swings before the final tech bubble grew and burst, leading to higher volatility in a bull market.

However, we haven’t seen any big spikes higher such as in 2008 or 2020, even with the market’s slide in 2022, which was the worst year since 2008.

Such spikes tend to be short-lived, lasting months at the most, and usually just weeks. However, when that’s occurring, markets tend to be in a meltdown mode.

 

 

To watch the full analysis, click here.